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How to Sue Debt Collectors

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Lawyer BooksNow that you are aware of what happens when debt collectors violate the FDCPA and you have some recorded phone calls, credit reporting violations, and false or misleading statements by a collector, what do you do then?

You sue them.

Nothing gets a company’s attention like slapping them with a lawsuit. As the saying goes, it’s all fun and games until someone gets sued.

From here, you have two choices and both will take you to the courthouse:

  • You can retain a lawyer to represent you, or,
  • Do it yourself.

I’ll explain both.

Retaining A Lawyer

If you retain a lawyer, the standard agreement is for the lawyer to take the case on contingency. That means they only get paid if you win or settle. If they are unwilling to work on contingency, at worst you would have an agreement that you pay the $350 filing fee and then the attorney takes the rest of the case on contingency. The typical settlement is around $3,500, so you can expect to pocket an easy $1k with the lawyer taking the balance. Usually, you’ll file the case in Federal court, which means the case will get resolved in 2-3 months.

When selecting a lawyer, you can’t just go with any lawyer, you will want a lawyer experienced in consumer law. They could be great at drafting wills and personal injury cases, but they likely have never seen a consumer law case in their career. In fact, the better the lawyer is, the less likely they are to have any clue about consumer law. There are a few good lawyers out there who do have consumer law experience, and you just have to shop around and find them. Check out the National Association of Consumer Advocates (NACA) for a lawyer in your area.

Why Suing Works

Debt collectors are terrified of lawsuits because a single lawsuit can cost tens of thousands of dollars in legal fees. If they lose the case, not only do they lose their own costs for defending against the lawsuit, they have to pay the attorney’s fees for both the defense and plaintiff as well as the judgment. Many of the smart companies would rather pay you $5,000 once as a settlement and be done with it. Collectors are in a high volume, low margin business and will have to collect on a lot of accounts to recover a $3500 average cost of settlement. (Getting sued a lot tends to drive up a collector’s insurance premiums too!)

Consider the response to a Forbes article by a Joel Lackey, President of National Credit systems who wrote regarding FDCPA lawsuits:

“The number of these suits has increased dramatically over the past few years, and the merit of these suits are typically laughable with absolutely no damage suffered by the debtor. The primary reason for this is that attorneys have become aware of the fact that a third-party debt collector cannot win when sued. It is simply a matter of how bad you are going to lose. Even if you win in court, you have lost big-time in that it will likely cost you tens of thousands of dollars to prove your case.

Let’s see, settle for $4,000 even though you did nothing wrong and the charges against you were completely unreasonable or fabricated, or roll the dice to prove your innocence and spend $30,000 in the process. That is, $30,000 if you win, and by the way, you will have no meaningful chance of recovering any of your costs.”

You Must Have A Case

I am not suggesting you fabricate a lawsuit because, quite frankly, you won’t have to. If a collector is going to violate the FDCPA, they will do it early and often. If you have documented violations, particularly recorded phone calls, you have a very solid case and I wouldn’t be shy about running with it.

This is also defensive strategy. If you are sued by a debt collector who has violated the law, counter-sue and watch them offer to pay you to drop the entire matter.

Debt collectors are so scared of being sued that they are creating databases to track people who counter-sue and actively avoiding them. Take a look at WebRecon.com and National FDCPA Litigation Tracking Resource.

Do It Yourself Lawyering

If you can’t find a suitable lawyer or you don’t want to split the potential winnings, you may need to take the case on your own. I recommend Federal court vs. state or small claims, because the judges in the lower courts are generally not familiar with the laws and court rulings in question. Plus, you don’t want it to be a first time for both of you.

Each federal court has a free pro-se litigant manual that includes sample forms, flowcharts, and explanations of the legal terms you may hear. If you have the time to invest in it, give it a shot, you may find it is worth your time in the endeavor. It will be a time investment to become familiar with everything so take that into account. Also, many of the lawyers representing the debt collectors do not respect pro-se litigants and may try to talk down to you. Take advantage of forums like Debtorboards for advice, that’s where other litigious consumers hang out and are more than willing to provide some assistance.

In reality, going without representation can be a blessing and advantage, since you don’t have to worry about legal bills, caseloads, and you don’t have to settle for a quick settlement. You can wait for a bigger payday, as the side faces a growing mountain of legal bills. Lawyers tend to want to go for the quick buck and the low hanging fruit and tend to overlook suing the individual employees and such.

Do you have any experience with or read stories about people successfully suing debt collectors?

(Photo: umjanedoan)

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39 Responses to “How to Sue Debt Collectors”

  1. Chris says:

    Are you able to record the phone call without their permission?

    • Cole Brodine says:

      Chris,

      I’m not an attorney, but here is what I understand. Most states have a policy requiring only one party to know they are being recorded, so as long as you know you are recording you should be okay. (I believe this is to prevent things like wiretapping)

      Some states have different policies, so you’ll want to do some research.

      • saladdin says:

        Chris,

        Start here. But verify the info. Has state by state guide.

        http://www.rcfp.org/taping/

        saladdin

        • Jim says:

          I just wrote up a post, to be published next week, referencing that site. It’s very comprehensive.

          • saladdin says:

            Sure you did. This is just like when I invented the internet and somebody else took credit.

            I turned on my house phone 8 months ago (I have never owned a cell phone) and I get 2-3 calls a day from collectors looking for the people who used to have the number. I thought about recording them but decided to threaten to kill their dogs instead.

            saladdin

    • eric says:

      Chris,

      You definitely want to google it because my state for example, considers recording calls illegal if BOTH parties aren’t informed.

    • craig says:

      In most states you can record without permission or notification and in every state, you can record after hearing “calls may be monitored”

      • daemondust says:

        Aah, English. What a wonderful language. They’re trying to be sneaky, but are (probably) giving up their rights when they say that.

        Does anyone know of any case law that upholds this theory?

        • codename47 says:

          I doubt there is much caselaw on the issue as recording is hardly challenged by anyone, and I think few people would argue they didn’t know there was a recording…after they stated that they would record the call…

  2. Very informative post! Thanks!

  3. Daniel says:

    I have used the free student legal services offered by the university for this. They wrote a letter to the collector stating they represented me and all correspondence must go through them from that point on. They stopped contacting me immediately and stopped pursuing the debt (which was wrongfully connected to me).

  4. Pro Se--No Se says:

    As an attorney who works as a district court law clerk, I have to seriously question the wisdom of the DIY lawyering discussed in this post. I certainly would not consider litigating a case without legal training as a “blessing and advantage.”

    From my work in the court, I see pro se filings three or four times a week. I would say that 90% of the time they are ineffective at best and financially dangerous at worst (judges can issue financial sanctions for frivolous arguments, etc). Pro se litigants rarely win, and are usually booted out of court on a procedural technicality.

    All this is to say, you are better off with a bad lawyer than no lawyer at all. Yes, you are probably smarter than the lawyer. It does not take supreme intelligence to practice law with reasonable competence. But the lawyer knows court procedure, pleading standards, negotiation techniques, etc, that most pro se litigants don’t. Unless you have a lot of time and energy to devote to learning the Rules of Civil Procedure, finding statutes, researching case law, drafting a complaint, serving process, surviving a motion to dismiss, etc., you would be better off going with a contingent fee lawyer who does this stuff everyday.

    DIY lawyering is, I think, a little like DIY surgery. Yeah, with the help of WebMD and some library books you might be able to pull it off, but why would you want to?

    • saladdin says:

      You want to know why people DIY? Because there are some of us who want to use the legal system but can’t afford a lawyer. Small claims and traffic court are two examples that we “average” folks would love to hire a lawyer. But when lawyers charge $500-$1000 when we want to challenge a $250 traffic ticket it’s not feasible. These courts are very casual anyway it’s not a murder charge, which I would hire Perry Mason for.

      Comparing surgery with lawyering is a little silly. And by the way, my last dcotor’s visit was last month and I brought in pages from web searches which caused my doctor to prescribe a better medicine then what I had been on.

      saladdin

    • codename47 says:

      Legal training is no huge blessing or advantage. All you know are the procedures. You can go to debtorboards and pick that up in 2 weeks.

      Maybe your pro-se litigants haven’t been to debtorboards. Judges aren’t looking to sanction pro-se litigants unless you do something like write a “motion to kiss my ass” or something like that. Yes, it’s been done and yes it is unwise.

      I’m running about an 85-90% win-loss ratio right now, so I must be superman or your stats must be off.

      Your bad lawyer vs no lawyer isn’t true at all. bad lawyers will lose your case and waste tons of money along the way. I can lose a case on my own. I don’t need to pay anyone to do that.

      The ONLY thing lawyers have you on are procedures. They don’t generally know anything about consumer law, which gives you an advantage. As far as negotiation techniques, lawyers are terrible at that generally, and I’ve got a good one: my way or the highway.

      Process serving and surviving a motion to dismiss aren’t hard at all. I’ve heard the same lamo arguments from financial planners who say that you should trust them with your money because they are so smart and well versed and so forth. want to beat 75% of all financial planners? buy an index fund. Want to beat a lawyer? Sue pro-se.

      Going to court and cutting someone open are two vastly different things.

    • daemondust says:

      Maybe pro se isn’t for you. Go ahead and spend $500+ an hour on a $200 ticket. Going pro-se works for a lot of people.

      While they don’t have to, Judge I’ve seen gives quite a bit of leeway to a pro se litigant. Rather than censuring you, they’d let you know what you did was wrong, why, and maybe even give you a suggestion on how you should have done it, as long as they don’t get the suspicion that you’re trying to pull a fast one on them.

      • codename47 says:

        I agree, judges tend to explain what you did wrong if you ever make a mistake and usually give you a chance to fix it.

        • saladdin says:

          Creditboards has a pretty good “I’ve been served” forum that could be useful for DIY lawyers.

          saladdin

  5. Chris says:

    Thanks everyone!

  6. Hank says:

    The average award is $3,500, but you can only expect to receive $1,000? I thought lawyers only got 1/3. It almost doesn’t sound worth it to give up most of the money.

  7. TheMadTurtle says:

    Hmmm…I, too, used an attorney to write a nastygram to a collection agency that had been hounding me for a debt that wasn’t mine (in fairness, my name is about as common as John Smith). Perhaps I should’ve pursued a lawsuit instead? Eh…they haven’t called me since my attorney’s letter, so I guess I’m happy with that. I am in a pre-paid legal plan, so the attorney was already paid for.

  8. Anonymous says:

    if my lawyer put in the divorce degree that my ex is responsible for the debt and the judge signed off on it and Ive sent the collectors the divorce papers and Ive signed fraud papers also why does the collectors say that that paperwork doesn’t work and that i am still responsible for the debt they wont stop calling what should i do

    • DRE says:

      A divorce decree does not negate a contract. The creditor can come after you if your ex does not pay. You may have to sue your ex for any monies you are out and your ex may be held in contempt of court.

  9. John Russell says:

    A debt buyer added almost 200 to the debt they baught was that illegal? It shows they added it almost a year after they baught it

  10. sediqua22 says:

    For the most part, I find dealing with attorney to be a losing battle, just simply due to the fact that rarely, do your agenda’s match. Attornies are typically interested in billing and fees, and thats pretty much it. For the most part, because I am more passionate, I actually am more detailed oriented than an attorney anyway. Once the use of having the knowledge, and then being so over whelmed that you can not perform.

    I’ve dealt with attornies for many issues, and for the most part, they wait to the last minute, are unprepared and sloppy. you are better off doing your own litigation.

  11. Fred says:

    Here’s an idea! How about paying you bills?? Pretty simple! People can’t stay in business when people who owe them money hire ambulance chasers to sue them. Eventually the price of goods and services go up to defend against these suits and everyone pays in the end! When America falls, the foot of the consumer attorney (aka. Ambulance Chaser) will have his foot standing on the flag.

    • me says:

      Fred,
      That is just brilliant!!! Pay you bills!!!, some people cannot come up with the money, and furthermore when some do make payments they do not get applied where they should, back to square one.

    • MickG says:

      Well Fred that sounds so high minded. I could go into a long post of all that led to me falling behind in my bills, how it was no fault of my own, how not one of the Creditors, except one wanted to work with me…. All of them wanted when I fell behind when I was unemployed, thousands of dollars which if I had I wouldn’t be behind. When I finally did get a job it was $25K less than I had made before making it impossible to catch up. Next if you knew how this works, the original creditor sells off the debt, to in my opinion scam artists who buy it pennies on the dollar, and then sue you for the amount of the original debt + additional intrest, collection fees, attorney fees, and do almost nothing to try and get it. They forge documents, lie about last payment, etc. etc. Their goal which works most of the time, is to file a complaint, get no response, get a default judgment by the cleark, spend less than $500 and start garnishing your wages for years earnging thousands in the process. Now the origninal debtor gets non of this. I personally think this is a dishonest system at best. The laws should be changed that the Original creditor should have to maintain skin in the game, or it should be illegal for a third party to pursue this thing on their own, third party buyers they should frankly be out of business.

    • 1ofthemany says:

      Fight the good fight citizens and do not listen to this lame suggestion, not in this day and time, keep food in your house and a roof over your head first and foremost. It is about you the citizen not what the fear mongers has stated here. Learn, stand strong and move forward not backwards, we already have a big fight in front of us but it is doable!!!!

    • billh says:

      Fair debt Come on Fred, what about when you get a call from an out of State Debt Collector that refuses to even tell you who you allegedly owe money to? Are you saying you just pay them off so that they stop bothering you? Of course not. Don’t be stupid.
      I live in CA received a call from a collector in FL who refused to not only validate the debt, they refused to even tell me who they were collecting for. They said it was a gym membership but didn’t know what gym. They called me several times a day, each time I quoted the fair debt collection statutes and they just. Laughed at me.
      Because I live in San Francisco there are multiple free legal avenues for me to use, which I did.
      After the debt collector received the contact my attorney letter they decided to start calling me at 7am. I stopped answering their calls and tey were dumb enough to leave messages on voice mail.
      In all, I count 7 seperate violations. It also appears that they are not licensed in CA. Did someone say triple damages?

      Fred, if you think that their are not debt collectors that break the laws everyday, then maybe you should just go ahead and pay them for debts you don’t owe.

      By the way, I have been lucky enough to stay employed through these last few years and I do Not owe any unpaid bills, especially to some fake gym that doesnot even exist.

      There is nothing worse than being harassed all day every day by some slimey dirtbag collector breaking the law.

      Sue them, and sue them to the max!!!!

  12. chris says:

    I am currently sueing Emerld Marketing Group. They would call and harrass me at work and home. Saying they knew where I lived and would come to my home. As a Federal Debt collector. I know it was wrong so I sued. They have not settled yet but my attorney has asked for no more than 10,000 asking to cover reasonable attorney fees and court fees. I was told by my attorney to note every call, every email, and even take a picture of the caller ID with the number. Recording a conversation is easy just tell them since your recording me I will record you. Most of the time they don’t believe you. Good Luck to all of you in your battle against debt collectors. God Bless.

    • cherel says:

      Am in search of a consumer law. My cases is civil and the other one is federal. I have two big cases before me and there’s no way i can do this alone.And i do think if you can do it yourself, GO FOR IT.

  13. Jim says:

    Fred, Pay your bills? How about don’t violate Federal Law while trying to collect unpaid bills. Owing money isn’t against the law. Not complying with the Fair Debt Collection Practices Act is a violation of the law.

  14. alphaomega says:

    Hi
    I want to know How triple damages applyes against debt collectors.
    I hear that for example a debt collector IF CA is not license in your state to work as debt collectors is ilegal then If a debt collection agency call themselves as a law firm or attorneys of law that is ilegal too. and you can be entitle to triple damages
    but my question is how that star to get this. I thougth I need to report first to department of insurance or the bar of law in your state.
    or how you can get there If please somebody can e mail to let me know If codename47 can explain this I would really apreciated because I am dealing with a collection agencie now that call themselve attorney office and may be not license to collect debts in my state please If somebody can explain this

  15. Ron says:

    Don’t be fooled by this article completely! I sued a collection agency who violated my rights, knew they violated them, knew they might lose and continued to garnish my wages and make collection attempts!

    They went so far as to garnish me with out informing me which is more of a violation!

    Some are so aggressive and nasty suing them just pisses them off!

    If you sue make sure you have proof of EVERY violation they did and be proactive against them.

    They sue you…you show up and fight!

  16. John says:

    I am currently in a debt to the Thomas Agency (or so they say)for a uninsured motorist claim. They have made a third party contact to the DMV to suspend my liscence. If I read the FDCPA privacy laws correctly that is illigal? My liscence is currently under suspension. And they have not validated the debt as requested to do so. I also made the DMV aware of the breach in law and gave the appropriat people the copy’s of said law. Could I include the DMV as an accomplice in an undue hardship lawsuit?

  17. Clyde Mack Sanford says:

    Knowledge is power: Try “Suing Abusive Debt Collectors” and “Sticking It To Sue Happy Debt Collectors” by Allen Harkleroad, and/or http://www.Juris-Dictionary.com to obtain knowledge and power. One lady recently was awarded over $1 million dollars against the “collector” that was trying to collect a debt she did not owe. Another is on the verge of collecting $200,000 and another has collected $81,000 cash from abusive debt collectors. “This world is a dangerous place to live, not because of the people who activities are evil, but because of those who don’t do anything about it!” Albert Einstein.

  18. Victim says:

    I need advise. I was sued by a company, they hired a law firm/debt collector. I started a payment plan, all of a sudden they garnished the full amount I owe from my account. I was making payments towards the balance for 2 years.

    Bottom line, I was making payments for 2 years. they garnished money from account which the 2 years didn’t reflect.

  19. JEG says:

    I wonder if anyone knows the rules specifically to validating a debt. You read in the corresponding federal acts that a creditor must validate a debt and that validation if not made must be removed from the credit report.

    My particular case involves a hospital bill that was turned over to a collection agency back in 2010. When I received the collection letter I certified returned receipt validation letter.

    Not to long after I sent the letter I received a hospital itemized statement of what I supposedly owed and the what appears to be the hospitals contract establishing financial responsibility.

    Concern 1: Is it not a HIPPA violation to the tune of #250,000.00 plus to release and or obtain medical records without first getting signed release from the patient?

    Concern 2: The hospital contract appeared to be filled out by who I presume was a nurse or administrator and the signature line was blank. This was the first time I had seen the contract.

    OBTY it should be noted I live in the state of Nevada for those that are curious to find the laws.

    I wrote back and stated the information they had sent me was no proof of responsibility of the hospital bill as it obvious it was unsigned and filled by other persons and that this was the first time I was seeing it.

    The response I got back was hilarious. They told me I was welcome to come to their office (they are local) and show them my driver’s license.

    I responded back that even if I were to show up to their office and show them my driver’s license (which I had absolutely no intention of doing) what would that prove. They still did not have a single document with my signature or handwriting on to validate their claim. But they claimed they validated the debt and was pretty much end of the story until recently.

    I plan on confirming my understanding of Nevada law when it comes to the stature of limitations to debt. For open book accounts (credit cards etc.) it is 4 years. For contracts it six years. There is a clause in the 4 year statue of limitations that that reads “(c) An action upon a contract, obligation or liability not founded upon an instrument in writing.”. So if I am reading it correctly their ability to sue is outside of laches.

    If confirmed, I am marching down to Federal Court and hitting them several violations. I know you only have one year from when the act was done, but my argument is going to go to the fact they have continued to violate my rights by keeping it on my credit profile. Not sure if this represents a continuous act stopping the clock on the laches. But I recently sent the a notice of intent to sue if they did not provide the validation or remove it from my credit and they basically said we already provided that information and we are not going to send it to you again.

    We shall see about that when they get served with lawsuit and motions for interrogatories.

    Anyway, anyone have advice or corrections to my logic? I would be interested in reading what you all think, good or bad. Want to know if my reasoning is sound or if there are flaws in my intended actions.

    Thanks again,

    JEG


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